First Time Self-Assessment: Help please

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    First Time Self-Assessment: Help please

    Hi All,

    I am in the process of registering for Self-assessment to declare the income and pay the tax on my property for tax year 16/17.

    I understand I don't actually need to do this until October 17 but I need to do now as I need to borrow against my residential mortgage, and they will only take into account my rental income if they can see it on a tax return.

    So - I have read the HMRC guidance at https://www.gov.uk/renting-out-a-property/paying-tax, but still not 100% sure what I should be doing.

    I would appreciate any advice on doing this for the first time and also, if there are any other deductibles not on the HMRC list that I can use?

    For example:
    - Is there still a wear and tear allowance for tax year 16/17?
    - can I claim back the costs of tools purchased in order to undertake repairs?
    - can I put a value on my own time under "accountant fees" as I am undertaking the calculations and submission myself?

    Also, will I need to support every figure to HMRC? I.e. if I claim the cost of replacing the bed, will they need to see the receipt, and does this apply for every figure?

    Any advice for a first timer would be greatly appreciated.

    Thanks

    Matt



    #2
    There no wear and tear allowance for the 2016/17 tax year.

    New tools are a capital cost rather than a revenue item - replacement tools might qualify, but in both cases have to be wholly and exclusively for the rental business, which isn't easy to prove if challenged.

    No, you can't claim for your own time (for anything, not just completing the tax forms).
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Originally posted by jpkeates View Post
      There no wear and tear allowance for the 2016/17 tax year.

      New tools are a capital cost rather than a revenue item - replacement tools might qualify, but in both cases have to be wholly and exclusively for the rental business, which isn't easy to prove if challenged.

      No, you can't claim for your own time (for anything, not just completing the tax forms).
      Thanks for you response, I appreciate it.

      My question about the accountant fees was because I am a qualified CIMA chartered management accountant - but obviously not an expert in tax, hence my questions! So even if I am an accountant myself and could justify a rate, I still couldn't deduct this?

      Also - the property is in my name only, but the rent is split between me and my partner. Can I half the tax liability and submit 2 returns, one for me and one for her, and thus utilising her lower rate tax band and also personal allowance? Also - and this may be a silly question - but as I use some of the rent to go into a trust fund for my 10 year son, could I submit a tax return on his behalf to utilise his personal allowance?

      Comment


        #4
        Sorry 1 more question as well. Do I need to work out my tax liability myself for the self assessment? Or do I just plug the numbers in the website and HMRC work out how much I owe?

        I am not self employed and pay 40% tax on the top end of my salary earnings via PAYE.

        Comment


          #5
          Even if you could pay yourself (which you cannot) you would have to declare that payment as income and pay tax on it.

          Get decent tax software. I use Taxcalc.

          Comment


            #6
            Originally posted by Matt_J View Post
            Sorry 1 more question as well. Do I need to work out my tax liability myself for the self assessment? Or do I just plug the numbers in the website and HMRC work out how much I owe?
            If you do the return now, HMRC will work out how much tax you owe - if you do it after the end of September they make you do it yourself (I think that date's right).

            Personally I pay an accountant to do the return and make sure I'm not paying too much tax. Costs me a few hundred quid (which is an allowable expense, so you get an effective 40% discount on the cost)
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment


              #7
              Originally posted by Matt_J View Post
              the property is in my name only, but the rent is split between me and my partner. Can I half the tax liability and submit 2 returns, one for me and one for her, and thus utilising her lower rate tax band and also personal allowance? Also - and this may be a silly question - but as I use some of the rent to go into a trust fund for my 10 year son, could I submit a tax return on his behalf to utilise his personal allowance?
              what started out as fairly simple has now become much more complex. You need a dedicated tax accountant for this kind of complexity.

              That's because when filing self-assessment, you are liable for any errors. If you muck up, which I've done once or twice in over 20 years of filing, they do not take kindly to you ringing to beg forgiveness afterwards. For example, I once forgot to tick the box that says that although I live overseas, I want to claim my personal allowance (it's not automatic if you're non-resident).

              I got hit with a tax bill I didn't expect and when I called to enquire, they told me I hadn't claimed my allowance. At the time I didn't realise I had to explicitly claim. I had to speak to a higher manager very very politely for them to accept that this was an innocent mistake which they would accept and thereby reissue my tax statement. I won't make that mistake again.

              As long as your letting isn't self-employment, you are legally required to keep the documentation of your expenses for 22 months after the end of the tax year you report on. See https://www.gov.uk/keeping-your-pay-tax-records

              As for your replacement bed, there are rules on what is a revenue expense. Look up "replacement of domestic items relief" to see if it qualifies.

              Comment


                #8
                Originally posted by Matt_J View Post
                My question about the accountant fees was because I am a qualified CIMA chartered management accountant - but obviously not an expert in tax, hence my questions! So even if I am an accountant myself and could justify a rate, I still couldn't deduct this?
                No.
                Also - the property is in my name only, but the rent is split between me and my partner. Can I half the tax liability and submit 2 returns, one for me and one for her, and thus utilising her lower rate tax band and also personal allowance? Also - and this may be a silly question - but as I use some of the rent to go into a trust fund for my 10 year son, could I submit a tax return on his behalf to utilise his personal allowance
                Who is the landlord? It's not where the money ends up, it's who it's paid to that matters for income tax.
                Same issue with the trust - what you use the income for isn't important, it's who receives it.
                When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                Comment


                  #9
                  Thanks for all the responses and advice guys, really appreciate it.

                  In answer to your question JpKeates - I am the landlord and 100% of the income is paid into my account, which I then distribute/hold in trust accounts.


                  Ok last question which I'm hoping some of your extremely helpful gents can advise me on. A lot of the maintenance works and some of the 2nd hand replacement furniture was paid in cash, and I did not get a receipt. Can I still claim these as deductibles as long as it seems fair and reasonable, and HMRC do not think I am taking the P? I.e. Were talking about a £100 sofa, £100 table and about £300 labour work, all paid for without a receipt.

                  Also on the subject of receipt/supporting documents, will I need to submit these as part of my self assessment? or only if HMRC come back to me and request them? And in the case of a £100 sofa with no receipt, would they ask me to amend my self assessment to remove this?

                  Comment


                    #10
                    You don't have to submit receipts with the return, and, if HMRC are happy they're not necessary.
                    If HMRC challenge the return they may ask for proof (which you won't be able to supply) - always get receipts or pay by some provable route.
                    It's not happened to me in many many years of tax returns, though.

                    If you want to take advantage of your partner's existence for tax, you'll essentially either have to give her some share in the property, make her a joint landlord (so you both receive the rent), or set up some kind of formal partnership arrangement or a trust.
                    A landlord doesn't have to own the property they let out, so being joint landlords would probably work - set up a joint bank account for your property business (and use it to receive rent and buy stuff through it).
                    Your partner will need to complete a tax return - however, at this point, you don't want to do that because of the need for mortgage acceptable income.
                    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                    Comment


                      #11
                      for the record, I've been filing returns since 1998 and have never been asked for receipts. I still keep them though and I do this electronically by scanning everything into the relevant folders for each property. I also keep a separate record of income and expenses in Excel as they occur and the spreadsheet I've made calculates the relevant figures for each box on the Property page of the tax return. I would strongly recommend that you keep your records up to date through the year in a way that's meaningful for you rather than leave it all until you have to file. It makes it much much easier to do.

                      Originally posted by jpkeates View Post
                      set up a joint bank account for your property business (and use it to receive rent and buy stuff through it).
                      my wife and I have properties that we own and let independently and others that we own as tenants in common and jointly let. Should we actually be treating the monies differently for each type of property.

                      Currently any jointly let properties pay income into one account. Expenses for any property are usually deducted from the rent unless there's a void in which case I pay from my account because I do most of the admin for our properties.

                      Would this arrangement be less than satisfactory for HRMC?


                      Comment


                        #12
                        It's not beyond challenge, as married couples are taxed individually, but it's probably fine.
                        Tax follows beneficial ownership, and if your finances are pretty much all merged it should be fine.

                        Normally any attempt to keep finances separate works the other way, as one person tries to show that their spouse's assets and income are separate from their own.
                        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                        Comment


                          #13
                          thought so. We don't have a joint account but we both have access to each other's and are often transferring money between accounts for various reasons. So, in practice, we simply have two pots we can both dip into and our income is effectively merged.

                          Comment


                            #14
                            Originally posted by Matt_J View Post
                            Sorry 1 more question as well. Do I need to work out my tax liability myself for the self assessment? Or do I just plug the numbers in the website and HMRC work out how much I owe?

                            I am not self employed and pay 40% tax on the top end of my salary earnings via PAYE.
                            To understand better , I suggest you download Form SA105 ( for property income ) and the SA105 notes from HMRC website

                            https://www.gov.uk/government/public...property-sa105

                            I would expect you to start from box 20 onwards,

                            You cannot charge for your own time as an expense against rental income. .

                            Comment

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